Indian rupee hits 5-month low today: Here we decode why
What's the story
The Indian rupee has witnessed its steepest one-day fall since May, hitting a five-month low today. The decline is mainly due to fears of high US tariffs on Indian exports and dollar demand from foreign banks and importers. The currency touched a low of 87.5125 against the US dollar before closing at 87.42, down by 0.7% for the day.
Market response
RBI intervenes to stabilize rupee
While the Reserve Bank of India (RBI) is believed to have intervened in a bid to stabilize the rupee, traders say that its efforts weren't very aggressive. According to Reuters, a 20-25% tariff could be slapped on India's exports if no trade deal is reached and as India refrains from making new concessions ahead of Friday's deadline.
Currency pressure
Trump's tariff threats and psychological impact on INR
US President Donald Trump had said yesterday that a trade deal with India was not finalized and higher tariffs were possible. Dilip Parmar, a foreign exchange analyst at HDFC Securities, claimed that Trump's tariff threats, the psychological impact of the rupee breaching the 87 mark, and importers' urgency to hedge before August 1 deadline have all contributed to this currency pressure.
Currency forecast
INR could fall below 88 mark
Parmar warned that if the situation continues, the rupee might fall below 88 in the coming weeks. The local currency had earlier hit an all-time low of 87.95 in February.